Stewart Troubles Worry Wall Street

N E W  Y O R K, June 24 -- Martha Stewart and her stockbroker apparently exchanged phone calls — amid the broker's expectations ImClone was "going to start trading downwards" — immediately before Stewart's controversial sale of the stock, a congressional investigator said.

That is leading investigators to wonder: What did Martha Stewart know when she told stockbroker Peter Bacanovic to sell a quarter million dollars of ImClone stock? Did she know that the next day ImClone would announce problems that would further weaken the stock?

Broker Contact With Stewart

Shortly before he made the sale for Stewart, Bacanovic had reportedly sold a lot of ImClone stock for the daughter of Sam Waksal, the indicted CEO of ImClone. Bacanovic then tried to reach Stewart, who is Waksal's friend.

A memo from Stewart's secretary reports, amid notes about plum puddings and lampshades, that, "Bacanovic thinks ImClone is going to start trading downward."

"He didn't say he watched it go down on the market," said Rep. James Greenwood, R-Pa., whose committee is investigating ImClone. "He said he thinks it's going to, which leads one to believe that that was inside information that he had, that he then passed on to Mrs. Stewart."

Greenwood says Stewart called back Bacanovic — and stayed on the phone with him for 11 minutes, phone records reportedly show — before he made the sale for her.

Greenwood's committee hopes to interview the stockbroker, and has subpoenaed Bacanovic's list of clients.

"We'll certainly ask him questions about his conversation with Ms. Stewart, and we'll see where that leads us," Greenwood said.

Nervousness on Wall Street

The fact that Martha Stewart is under investigation for insider trading is causing nervousness not only in the world of glue guns and fancy cakes, but on Wall Street as well. Shares in her own company, Martha Stewart Living Omnimedia, have also suffered amid the revelations.

That's especially true because Stewart was recently made a member of the New York Stock Exchange's Board of Directors, which has only 27 members.